Subscribe To Our News Letter

Among various long term financial goals, child future planning falls in the top list which parent need to take up at a very early stage. When one gets into parenthood and give birth to a child you reciprocate in mind on what values as parent will you like them to adopt in making them a better person in life. As parent you also go on day dreaming on what you intend to make them opt for as professionals, a Doctor or an Engineer, a management graduate or an entrepreneur. But at that point of time lesser do one realize what all financially will it take to support such desired dreams and goals.

Gone are those days when conventional methods of saving was fair enough to build a corpus required for supporting your child’s future planning. Namely, their education or marriage. Setting aside some money in savings every year or even dedicating money to your PPF or NSC are no longer viable propositions to look for child future planning. These investments opportunities no longer meet the requirement which one foresee years ahead and can provide to be inadequate in the present scenario.

Again, the culprit here is none other than inflation. None of the goals for child future planning like the education, marriage or may be starting up a new business later in years are unscathed by rising prices.

The key towards child future planning lies in identifying each objective that you wish to provide for in a definite manner and then quantifying it. One should have multiple investment portfolios and should be specifically named as to child education or child marriage or a corpus or a seed capital for starting up business. Followed in a disciplined manner as your sacred investments which should not be deviated come what may for years together. Because if you do that, you defy your purpose of investing for a particular goal and when it is for a child’s future financial requirements there should not be any callous or reckless attitude towards it.

Children and their well being often rank at the highest priorities for parent and words like “only the best” or “you deserve the best” are commonly heard. However, having a heart in the right place is insufficient and rather a practical approach is needed to ensure that works toward providing your child with the financial security in future.

Investing for your child’s education is one of the most important and the prioritized goal in any parent’s life. Let’s now know in brief over the education system that our country has. The education system in our country has been rapidly growing with more schools & colleges, engineering medical and management institutes providing the best of infrastructure and experienced teachers providing quality education. With more private participation in the field of providing world class education facilities for the youth. Parent desire to fund such expenses on higher education has become a prime concern. The cost of education has increased manifolds in the last one decade and is supposedly going to grow forward with the rising cost of inputs to facilitate quality education.

To plan for such education expenses has become inevitable. To explain you further, let me explain with an example: Prakash has a 5-years old son, he wishes to plan for his higher education. When his son turns 18 which is 13 years ahead. Prakash foresees the expenditure on his son’s higher education at 20 lacs. For an Engineering Course and further an M.B.A. This money will be required once he goes for his engineering after 18 years of age for 5 to 6 years till he does his M.B.A. Rs 20 lacs is assumed as the total cost of education on engineering and M.B.A. Course fees and also the living expense for six years that needs to be funded as there is a fair possibility that his son might not get the admission in the city where he resides. Now having factored in the inflation in the education cost at 10% compounded. This 20 lacs will turn into 69 lacs in 13 years. This is almost 3.5 times of the current cost of education.

What this example leads to is: Parent need to identify how much time they need to dedicate in a disciplined manner to get to their goal and the commitment towards their goal. Origination of a planning at an early stage is an important step and a primary decision in the process of child future planning. It is important for the parent to understand that if they start planning early enough, they can comfortably meet this sparkling cost of their child education.

Another very important aspect which parent need to know is: understanding of risk in the assets namely stocks which are compositions of direct equity or equity related mutual funds. These and Real estate asset is very risky in short term say three years or less but in long run equity and real estate has a potential to create more wealth and are less risky. Herein one should also understand that allocating investments in risk free debt scenario is not suitable as debt is more a preserver of wealth and not an accumulator. Also, it is marginally ahead of inflation which is expected to grow at a rate of average 6% in long run. An investment in debt at 8% pre-tax does not create wealth for you. Hence, for long term goal money should be allocated towards equity and real estate assets which grows far ahead of inflation thereby creating wealth for you in long run. Parent who allocate savings towards equity and real estate need to save lesser for the child education or any other long term goal.